Interim Results

18 December 2012

Fastnet Oil & Gas plc

("Fastnet", the "Company" or the "Group")

Interim Results for the six months ended 30 September 2012

Fastnet, the oil and gas exploration company with near-term and medium-term drilling opportunities on exploration acreage in Morocco and the Celtic Sea, announces its interim results for the six month period ended 30 September 2012.

Operational Highlights

·; Assembled a portfolio of material and potentially transformational exploration assets in Morocco and the Celtic Sea

·; Successful entry into offshore Morocco (Foum Assaka Licence) providing exposure to a potential "play opening" well in late 2013, in partnership with Kosmos Energy, Technical Operator of the Jubilee Field in Ghana

·; 2,577 sq. km. 3D seismic survey completed in Foum Assaka by WesternGeco in Q1 2012 and currently being processed by CGGVeritas

·; Substantial prospect inventory being matured

·; Established the largest, exploration-focussed, acreage position in the Celtic Sea where a significant 3D seismic survey is scheduled for Q2 2013 to potentially de-risk multiple prospects for drilling in 2014

·; Publication of independent technical report for Molly Malone and Mizzen Licensing Options independently confirms the potential for unrisked multi -TCF and multi-BBO oil and gas prospects

·; Mizzen Basin seismic re-processing and AVO/Rock Property Modelling to investigate potential seismic anomalies related to presence of gas currently in progress with WesternGeco

·; Fully funded to meet all current licence commitments and obligations together with a non-obligatory drilling programme in Morocco and 3D seismic acquisition offshore Ireland in 2013

Corporate Activity

·; Successful acquisition of Terra Energy Limited and admission to trading on AIM and ESM

·; Acquisition of Pathfinder Hydrocarbon Ventures Ltd ("Pathfinder"), predominantly for shares, providing a material equity position in the Foum Assaka Licence, offshore Morocco, together with the accrued benefit of a carry through seismic acquisition and processing capped at a gross amount of USD 16.2 million

Financial

·; Successful £10.0 million fundraising, principally with institutional investors, coinciding with IPO

·; Cash at 30 September 2012: £8.4 million

·; Net loss for the period of £1.5 million inclusive of the acquisition costs of Pathfinder

Post-Interim Results

·; Successful share placing raised approximately £15.0 million in November 2012 to further strengthen the Balance Sheet

·; Awarded Licensing Option 12/6 (Block 49/13) and farmed-into the Licensing Option 12/5 ("Shanagarry") in the North Celtic Sea, previously operated by Marathon Oil

·; Board strengthened with the appointment of Paul Griffiths as Managing Director and Carol Law as Executive Director

Strategy and Outlook

The Board's strategy remains to create shareholder value through exploration success, which is intended to be achieved through the retention of material positions in high-potential prospects where a drilling programme can be fast-tracked in partnership with a credible operator with an established track record of delivering exploration success. The Board takes the view that it should always be in a position to fully fund its drilling commitments from the Company's Balance Sheet, but that if the opportunity presents itself to negotiate a farmout on attractive terms then it should use its cash resources in combination with favourable terms to gain exposure to a larger drilling programme, whilst always maintaining a material equity interest.

The Company's strong financial position provides sufficient funding for the 2013 drilling programme with Kosmos Energy in the Foum Assaka Licence offshore Morocco. The proposed well will potentially be "play opening" in that it will be the first test of the "Jubilee Play Analogue", offshore Morocco. If successful, there is the further potential for multiple discoveries on the large prospect inventory being matured in the Foum Assaka Licence.

The Company's strategy offshore Ireland is analogous to that which it has successfully developed for offshore Morocco. the Board will focus on de-risking, maturing and unlocking the resource potential of the material prospects already identified on 2D seismic data by investing in 3D seismic acquisition and processing in 2013 with the objective of preparing a drilling programme for 2014. As is the case for Foum Assaka, the Company will be seeking an operator with a proven track record of exploration success to help fund the exploration programme and to fast-track the drilling programme. 

Cathal Friel, Executive Chairman of Fastnet, commented:

"The past six months have been a transformational period for Fastnet and its shareholders. We have successfully built the foundations of an oil and gas exploration business by acquiring a material portfolio of exploration assets. We have de-risked our Moroccan assets by acquiring 3D seismic which, in combination with partnering with an experienced operator with a track record of exploration success, has allowed us to quickly move to drilling scheduled for 2013. Morocco is an emerging exploration frontier area on the West African Margin with an attractive fiscal regime which is currently receiving intense industry interest. It is anticipated that a number of wells will be drilled offshore Morocco over the next two years and we intend that Fastnet will be at the forefront of this drilling activity. Our high-impact exploration programme for 2013 is fully funded as a result of the capital raised this year.

"Fastnet has demonstrated its ability to grow shareholder value through using its experienced management team to acquire, at low entry cost, a portfolio of attractive exploration licences with material exploration prospects. The Company is now focused on delivering the next stage in the value-creating cycle through the drill bit."

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Chairman's and Managing Director's Statement

We are pleased to report on the progress of Fastnet Oil and Gas plc ("Fastnet" or the "Company") and present the unaudited interim results for the six month period ended 30 September 2012.

Operations Review

Fastnet was established following the reverse takeover by Terra Energy Limited ("Terra") of AIM quoted company, Sterling Green Group plc ("Sterling Green") in June 2012. Sterling Green was subsequently renamed Fastnet Oil and Gas plc and was admitted to trading on AIM and ESM in June 2012. Since admission, Fastnet has moved quickly to establish a portfolio of material ground floor interests in potentially high impact exploration prospects in both Offshore Morocco and Offshore Ireland.

Offshore Morocco

Following its acquisition of Pathfinder Hydrocarbon Ventures Ltd in July 2012, Fastnet holds an 18.75% economic (25% paying) interest in the Foum Assaka exploration licence in the Agadir Basin, Offshore Morocco. The Directors are excited about Fastnet's entry to Offshore Morocco, which is an emerging exploration frontier area on the West African Margin for the oil and gas industry with an attractive fiscal regime. Recent industry farm-in activity helps validate the significant oil and gas potential of the region.

The Foum Assaka licence area covers approximately 6,500 sq km and is operated by Kosmos Energy Deepwater Morocco ("Kosmos"). Kosmos is an international oil and gas exploration and production company that was the technical operator for the Jubilee Field discovery, Offshore Ghana. Fastnet has been carried through the Foum Assaka Initial Exploration Period work programme based on a gross budget cap of US$16.2m. This work programme includes the acquisition and processing of 2,500 sq km of 3D seismic. This seismic acquisition (2,577 sq km in total) was completed in April 2012, with processing and interpretation of the data on-going. The Directors anticipate that, subject to all necessary regulatory consents and the timing of rig availability, drilling of the first exploration well in Foum Assaka should commence in Q4-2013.

Offshore Ireland

In June 2012, Fastnet was awarded two licensing options, the Mizzen and Molly Malone Licensing Options in the Celtic Sea, Offshore Ireland. The Mizzen Licensing Option covers blocks 55/14 and 55/15 and part blocks 55/9 and 55/10 while the Molly Malone Licensing Option covers block 50/26 and part blocks 49/25, 49/30, 50/21 and 50/22, each in the Celtic Sea basin. The Directors believe these areas have the potential to host major oil and gas accumulations based on their attractive petroleum geology and the presence of well-understood large-field analogues in other areas.

In November 2012, Fastnet was granted a further Celtic Sea Licensing Option covering block/part-blocks 49/7, 49/8, 49/9, 49/12 and 49/13 ("Licensing Option 12/6") and also agreed to farm-into Licensing Option 12/5 which includes part-blocks 49/18, 49/19, 49/20, 49/23, 49/24 and 49/25 ("Shanagarry"). The Directors are excited about the Licensing Option award and the farm-in to the Shanagarry Licensing Option. The previous operator in the Shanagarry Licensing Option Area, Marathon Oil Corporation ("Marathon") mapped a 120 km sq structure that was proved to be hydrocarbon bearing after logging a gross combined oil and gas column of approximately 500 feet at different stratigraphic levels in well 49/19-1 drilled in 1984. The well was not fully tested due to operational issues and poor gas economics at the time. However, four viable petroleum systems were proven by the well results, with offset field analogues. Similarly, Licensing Option 12/6 has already been proven to have discovered hydrocarbons in different stratigraphic sections over a gross combined interval of up to 700 feet in early wells drilled by Marathon and its partners in 1974 and 1986.

Fastnet has now established a material position in the Celtic Sea, where there has been renewed exploration interest following the recent Barryroe discovery. The Company is currently tendering for a seismic vessel for Q2-2013 for a 3D seismic survey most probably in the Mizzen Licensing Option with the opportunity to add further 3D seismic programmes for 2013. The order of 3D acquisition priority will be finalised once bids are received from seismic contractors. The Directors anticipate that this will de-risk and unlock resource potential and should, in the Board's view, increase the likelihood of attracting an industry major to the proposed programme given the scale and materiality of the prospective structures already identified.

Financial Review and Working Capital

Fastnet is an early stage oil and gas exploration company with no revenue generated to date. The Company is reporting a loss for the six month period of £1,509,871 (three months to 31 March 2012: £70,218, 12 months to 31 December 2011: £129,791). The increased loss reflects the transition of the Company from a private company focussed on unconventional oil and gas resources to a publicly listed oil and gas exploration company focussed on resources in Africa and Offshore Ireland. The loss for the period comprises general and administrative costs of £445,809, share based payment charge of £98,635, reverse asset acquisition and AIM admission costs of £1,016,253 (this includes an accounting adjustment for a deemed cost of the business combination of Terra and Sterling Green of £806,503) and interest and other income of £50,827.

In June 2012, as part of a share placing to coincide with the admission of the Company to AIM and ESM, £10,000,000 before costs was raised by the issue of 90,909,091 new ordinary shares at 11 pence per share. As at 30 September 2012, the Company had cash balances of £8,380,446. In addition, in November 2012, the Company successfully raised £14,960,000 before expenses through an oversubscribed placing of 68,000,000 new ordinary shares in the capital of the Company with new and existing investors at 22 pence per share. The fund raising was approved by shareholder resolution at a General Meeting of the Company on 10 December 2012. Accordingly, the Company is now well funded for its exploration activities for the medium term.

Corporate Overview

In November 2012, the Board was substantially strengthened with the appointments of Paul Griffiths as Managing Director and Carol Law as Executive Director. The Board now consists of Cathal Friel, Paul Griffiths and Carol Law in executive roles with Michael Nolan, Michael Edelson and Stephen Staley as non-executive Directors. Upon her appointment as an Executive Director, Carol Law was granted 2,000,000 share options and a total of 1,650,000 share options were granted to a number of consultants and advisors to the Company. All of the options granted are exercisable over two years from the date of grant at an exercise price of £0.15 per share, the prevailing market price at time of issue.

Outlook and Future Developments

Although the minimum work commitments in relation to our Moroccan and Irish licences represent a relatively modest capital commitment in the short term and can be funded by existing cash resources, the Board is of the view that having raised additional capital now to further strengthen our balance sheet, the Company will be able to accelerate its drilling programme in Morocco to potentially generate a near-term multi-well drilling programme. The Company also wishes to continue with its low cost work programme to de-risk its Irish assets to a stage where major partners can be brought in for sustained value creating exploration work and drilling programmes once the potential has been adequately assessed.

The Board's strategy is to ensure that the Company retains a material, well-funded interest in its portfolio of prospects that are being matured for drilling. This is the first step to implementing Fastnet's stated strategy of creating shareholder value through exploration success.

Group Statement of Comprehensive Income

For the six months ended 30 September 2012

Group Statement of Financial Position

As at 30 September 2012

Group Statement of Cash Flows

For the six months ended 30 September 2012

Group Statement of Changes in Equity

For the six months ended 30 September 2012

Company Information

1 General Information

Fastnet Oil and Gas plc ("Fastnet" or the "Company") is a company incorporated in England and Wales. Details of the registered office, the officers and advisers to the Company are presented on the Company Information page at the end of this report. The Company's offices are in Manchester and Dublin. The Company is listed on the AIM market of the London Stock Exchange (ticker: FAST.L) and the Enterprise Securities Market of the Irish Stock Exchange (ticker: FOI).

Fastnet was established following the reverse takeover by Terra Energy Limited of AIM listed Sterling Green Group plc ("Sterling Green") in June 2012. Sterling Green was subsequently renamed Fastnet Oil and Gas plc with Terra Energy Limited renamed Fastnet Oil and Gas (Ireland) Limited. The principal activity of the Company is oil and gas exploration.

The interim results of the Company for the six month period ended 30 September 2012 comprise the Company and its subsidiaries (together the "Group").

2 Basis of Preparation

The interim results have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), and their interpretations adopted by the International Accounting Standards Board ("IASB"). As is permitted by the AIM rules the Directors have not adopted the requirements of IAS34 "Interim Financial Reporting" in preparing the financial statements. Accordingly the financial statements are not in full compliance with IFRS. The accounting policies used in the preparation of the interim financial information are the same as those used in the Company's audited financial statements for the period ended 31 March 2012.

The Directors consider that the financial information presented in this Interim Report represents fairly the financial position, operations and cash flows for the period, in conformity with IFRS. The Interim Report for the six months ended 30 September 2012 was approved by the Directors on 14 December 2012.

Reverse Asset Acquisition

On 11 June 2012 Sterling Green Group plc ("Sterling Green") became the legal parent company of Terra Energy Limited ("Terra") in a share for share transaction, and on the same date changed its name from Sterling Green to Fastnet Oil and Gas plc ("Fastnet"). Due to the relative size of the companies, Terra's shareholders became the majority shareholders of the enlarged share capital (before a share placing on the same date). In addition, the Company's continuing operations and executive management became those of Terra.

As Sterling Green was an AIM quoted investing company with no assets other than the cash on its balance sheet on the date of acquisition, under IFRS rules the acquisition constitutes a reverse asset acquisition of Sterling Green by Terra. It would normally be necessary for the Company's consolidated accounts to follow the legal form of the business combination - with Terra's results from the acquisition date of 11 June 2012 consolidated into the Group results. In this case, the consolidated accounts have been treated as being a continuation of the accounts of Terra with Sterling Green being treated for accounting purposes as the acquired entity.

As the consolidated group results represent a continuation of the financial statements of the legal subsidiary, the assets and liabilities of Terra have been recognised and measured in the consolidated results at their pre-combination carrying amounts. The retained earnings and other equity balances recognised are the retained earnings and other equity balances of Terra immediately before the business combination and the amount recognised as issued equity instruments has been determined by adding to the issued equity of Terra immediately before the business combination the cost of the combination, being the value of notional shares issued by Terra. To comply with UK company law adjustments have been made to the consolidated reserves to reflect the equity structure of the legal parent company.

Comparative Information

The comparative figures presented are those for Terra and relate to the year ended 31 December 2011 and the 3 month period ended 31 March 2012. The financial information presented for the comparative periods is an extraction from Terra's audited accounts on which the auditors issued an unqualified report; the information presented does not constitute full accounts for those periods.

The prior period accounts for Terra were prepared in Euro ("€"). Balances for the comparative periods have been transferred to Pounds Sterling ("£") at a rate of £1:€1.199.

Summary of Significant Accounting Policies

Exploration and Evaluation Assets

Exploration and evaluation assets are measured using the cost method of recognition. Exploration and evaluation expenditure is capitalised and recognised as an exploration and evaluation asset when the rights to an area of interest are current, the expenditures are expected to be recouped through successful development and exploitation activities and the operations are current and have not reached such a stage that a reasonable assessment of recoverable reserves can be made. 

Exploration and evaluation expenditure includes; acquisition of rights to explore, researching, analysing and collating of historical data, geological and geophysical costs, exploratory drilling, evaluation of technical feasibility and commercial viability and administrative and general overheads related to an area of interest.

Business Combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed and included in general and administrative expenses.

Share based payments

The Group issues share options as an incentive to certain key management and staff. The fair value of options granted is recognised as an expense with a corresponding credit to the share-based payment reserve. The fair value is measured at grant date and spread over the period during which the awards vest.

For equity-settled share-based payment transactions, the goods or services received and the corresponding increase in equity are measured directly at the fair value of the goods or services received, unless that fair value cannot be estimated reliably. If it is not possible to estimate reliably the fair value of the goods or services received, the fair value of the equity instruments granted is used as a proxy. For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the period.

The Group may issue warrants to key consultants, advisers and suppliers in payment or part payment for services or supplies provided to the Group. The fair value of warrants granted is recognised as an expense with a corresponding credit to the share-based payment reserve. The fair value is measured at grant date and spread over the period during which the warrants vest. The fair value is measured using the Black-Scholes model if the fair value of the services received cannot be measured reliably.

3 Exploration and Evaluation Assets

4 Business Combinations

Reverse Asset Acquisition of Sterling Green Group plc by Terra Energy Limited

As detailed in note 2 the acquisition by Sterling Green of Terra has been treated for accounting purposes as a reverse asset acquisition by Terra of Sterling Green. In a reverse asset acquisition, the cost of the business combination is deemed to have been incurred by the legal subsidiary in the form of notional equity instruments issued to the owners of the legal parent. The value of the notional shares is calculated by reference to the proportion of shares that would be needed to be issued by Terra to Sterling Green if the old shareholder base of Sterling Green was to maintain the same percentage holding in Terra as it received in the combined Group.

The value of these notional shares issued by Terra was compared to the Net Asset value of Sterling Green on the date of acquisition and the excess (£806,503) was charged to the Income Statement as a deemed cost of the business combination.

Acquisition of Pathfinder Hydrocarbon Ventures limited

On 17 July 2012 Fastnet acquired the entire issued share capital of Pathfinder Hydrocarbon Ventures Ltd ("Pathfinder") from Pathfinder Energy Maghreb plc ("PEMP") for an initial consideration of US$8.0 million. The consideration was satisfied by the payment of US$1.0 million (£0.647 million) in cash and by the issue of 40,688,212 new Ordinary Shares in the capital of the Company at a price of 11 pence per Ordinary Share. Additional contingent consideration of US$1.0 million is payable on the condition that Pathfinder receives payment from Kosmos Energy Deepwater Morocco ("KEDM"), a wholly owned subsidiary of Kosmos Energy Limited ("Kosmos"), of US$1.0 million receivable by Pathfinder under a farm-out agreement between the parties - this payment was made subsequent to the period end (see note 6 - subsequent events).

Assets acquired and liabilities assumed:

List of Subsidiary Companies

There were no subsidiary companies at 31 March 2012 and 31 December 2011. The results for the periods ending at those dates relate entirely to that of Terra Energy Limited.

5 Shares in Issue and Earnings per Share

In the Interim Report the Company presents basic and diluted earnings per share ("EPS") data for its Ordinary Shares. Basic EPS is calculated by dividing the profit or loss attributable to Ordinary Shareholders of the Company by the weighted average number of Ordinary Shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to Ordinary Shareholders and the weighted average number of Ordinary Shares outstanding for the effects of all dilutive potential Ordinary Shares, which comprise warrants and share options granted by the Company.

In the current period the denominator used in the EPS calculation is the weighted average number of shares in issue in Terra Energy Limited ("Terra" ) for the period pre acquisition (1 April to 11 June) multiplied by the exchange ratio (32.28:1) of Sterling Green Group plc shares received by Terra shareholders as part of the acquisition and divided by the consolidation ratio (38:1) of shares in the enlarged share group added to the weighted average number of shares in issue for Fastnet Oil and Gas plc for the period post acquisition.

The comparative figures are based on Terra's reported loss for the period divided by the weighted average number of shares in issue in Terra for the period multiplied by the exchange ratio (32.28:1) and divided by the consolidation ratio (38:1).

Issued share capital - Ordinary Shares of £0.038 each

Where a loss has occurred, basic and diluted EPS are the same because the outstanding share options and warrants are anti-dilutive. Accordingly, diluted EPS equals the basic EPS. The share options and warrants outstanding as at 30 September 2012 totalled 7,613,325 and are potentially dilutive.

6 Subsequent Events

Government approval of Foum Assaka Farm-in

On 16 October 2012 the Company announced that Moroccan Government approval, through a Joint Ministerial Order, was granted approving the Foum Assaka Offshore farm-down from Pathfinder to KEDM. Prior to the issue of the Joint Ministerial Order, Pathfinder held a 37.5% economic interest (50% paying interest) in the Foum Assaka Licence. Pathfinder sold an 18.75% economic interest (25% paying interest) to KEDM; hence Pathfinder now holds an 18.75% economic interest (25% paying interest) in the Licence.

Exercise of Option to participate in Merada Licence Application

On 7 November 2012, Fastnet announced that, through its wholly owned subsidiary Pathfinder, it agreed to exercise its option over a 50% participating interest in a proposed oil and gas exploration licence application onshore Morocco (the "Merada Licence Application"). The Merada Licence Application is subject to approval and execution by the Office National des Hydrocarbures et des Mines in Morocco.

Awarding of Licensing Option in the North Celtic Sea

On 14 November 2012, the Company received notification from the Petroleum Affairs Division of the Irish Department of Communications, Energy and Natural Resources that it has been awarded Licensing Option 12/06 covering block/part blocks 49/7, 49/8, 49/9, 49/12 and 49/13 in the North Celtic Sea, Offshore Ireland. The Licensing Option commences on 15 November 2012 and runs for 18 months to 14 May 2014. The application for the Licensing Option was made jointly by Fastnet, Carob Limited, a consultant to Fastnet, and Petro-Celtex Consultancy Limited, a company established by Paul Griffiths, now Managing Director of Fastnet.

Farm-in to the Shanagarry Licensing Option

On 14 November 2012, the Company agreed (subject to regulatory approval) to farm-into Shanagarry licensing option which was recently awarded by the Irish Minister of State at the Department of Communications, Energy and Natural Resources to a joint venture group comprising Adriatic Oil Plc, Carob Limited (a consultant to Fastnet) and Petro-Celtex Consultancy Limited (a company established by Paul Griffiths, now Managing Director of Fastnet). The Shanagarry area lies south and northeast of the undeveloped Helvick oil and Old Head of Kinsale gas fields, respectively. The Shanagarry licensing option commences from 1 December 2012 until 31 May 2014 and includes part-Blocks 49/18, 49/19, 49/20, 49/23, 49/24 and 49/25 in the North Celtic Sea.

Successful placing of new Ordinary Shares to raise approximately £15 million

On 23 November 2012, Fastnet announced that Mirabaud Securities LLP as sole bookrunner and Shore Capital Stockbrokers Limited joint broker, have raised £14,960,000 before expenses through an oversubscribed placing of 68,000,000 new Ordinary Shares in the capital of the Company with new and existing investors at 22 pence per share. The placing was approved by shareholder resolution at a General Meeting of the Company on 10 December 2012.

7 Copy of the Interim Report

Copies of the Interim Report are available to download from the Company's website at www.fastnetoilandgas.com.